Chapter-7

Distribution System and Logistics

Learning Objectives

After reading and working the problems for Chapter 7 in the textbook and in this Workbook, you
should be able to:
 Explain the concept of distribution system
 Describe the direct distribution systems
 Define the indirect distribution systems
 Explain the physical distribution system
 Describe the distribution systems: multi-channel (hybrid)
 Define the establishing channel relationships
 Explain the objectives and decision areas
 Describe the scope of physical distribution
 Define the locating hospitality outlets
 Discuss the logistics decisions in brief
 Explain the logistics planning
 Define the customer service goals
 Discuss the logistics systems work
 Define the logistics planning is needed
 Explain the efficient supply chain management (SCM)
 Define the supply chain management technology
 Describe the issues in SCM
 Explain the integration of sales and distribution strategy
 Discuss about the supply-demand nexus
 Define the SCM framework
 Describe the interdependence of sales and distribution
Essential Concepts
1. The mindful of the factors affecting distribution decisions (i.e., marketing decision issues and
relationship issues), the marketer has several options to choose from when settling on a
design for their distribution network.
2. The entire set-up consisting of procedures, methods, equipment, and facilities, designed and
interconnected to facilitate and monitor the flow of goods or services from the source to the
end user.
3. Communication is the meaningful exchange of information between two or more
participants (machines, organisms or their parts).
4. The distribution system in which the ultimate buyer acquires the title directly from the
manufacturer of the product.
5. The multi-channel approach expands distribution and allows the marketer to reach a wider
market, however, as we discussed under Channel Relationships, the marketer must be careful
with this approach due to the potential for channel conflict.
6. The since channel members must be convinced to handle a marketer’s product it makes
sense to consider channel partner’s needs in the same way the marketer considers the final
user’s needs.
7. Physical distribution is the group of activities associated with the supply of finished product
from the production line to the consumers.
8. Physical distribution (PD) is much better understood in the context of the marketing of
tangible fast-moving consumer goods. It is also known as logistics and embraces activities
such as inventory management, warehousing, facilities location, packing, transport,
installation, customer service, materials handling and order processing.
9. The Hospitality is relationship between the guest and the host, or the act or practice of being
hospitable.
10. The probability of using a hotel rises in proportion to the distance of the customer’s
residence from it, whereas the probability of using a restaurant decreases in proportion to
distance Notably, it has been proven that the travel-time exponent varies according to the
class of trade.
11. The trading area decision, therefore, depends not only on the population of that particular
area, but also on its attraction to the residents of other areas. Other demographic factors to
consider are trends in population growth and structure. Population data are available from
 the electoral roll, government Censuses, newspaper circulation data and from school
enrolments.
12. Chain operations generally have formalized checklists of factors to be taken into account
during site selection.
13. Logistics is the management of the flow of goods between the point of origin and the point
of destination in order to meet the requirements of customers or corporations
14. The customer service is the ability to provide a service or product in the way that it has been
promised.
15. The customer is perception of value does not only come from the product or service you
offer, but also in the way it is offered.
16. The main goal of customer service is customer satisfaction. Customer satisfaction is when
the customer is satisfied with a product/service that meets the customer’s needs, wants, and
expectations. To further understand customer satisfaction, we must take a deeper look at the
levels of specific satisfaction.
17. The customer Satisfaction is a measure of how products and services supplied by a company
meet or surpass customer expectation.
18. The strategy issue is also a very important element of customer satisfaction, primarily
because it sets the tone for the appropriate training, behavior, and delivery of the specific
service.
19. Employee training is an important component of customer service. Customer service
principles should be put in writing, and it should be made clear that all employees are
expected to be familiar with them and be prepared to live up to them.
20. Logistics is the management of the flow of goods between the point of origin and the point
of destination in order to meet the requirements of customers or corporations.
21. The logistics is concerned with managing transportation, warehousing, and inventory
stocking activities.
22. Order processing is strictly related to information flows in the logistics system and includes a
number of operations.
23. Inventory management is a key issue in logistics system planning and operations. Inventories
are stockpiles of goods waiting to be manufactured, transported or sold.
 24. Competition is forcing the logistics portion of the supply chain to become more time
competitive and responsive to customer needs. Added to this are customer driven standards
for labeling and packaging.
25. Supply chains are simple, while others are rather complicated. The complexity of the supply
chain will vary with the size of the business and the intricacy and numbers of items that are
manufactured.
26. The requirement triggered by the customer’s sales order will be combined with other orders.
The planning department will create a production plan to produce the products to fulfill the
customer’s orders.
27. Sales and distribution management constitutes one of the most important parts of marketing
management. “Exchange” is the core aspect of marketing, and it is the sales and distribution
management which facilitates it.
28. The former deals with incoming queries from customers whereas the later process is targeted
at existing and potential customers. Both, however, have the common goal, i.e. increase in
sales.

Matching Definitions
Air transportation Communication
Customer satisfaction Customer service
Direct distribution Hospitality
Inventory management Logistics
Order processing Physical distribution

1. ………………………..It is the meaningful exchange of information between two or more

participants (machines, organisms or their parts).
2. ………………..It is a distribution system in which the ultimate buyer acquires the title
directly from the manufacturer of the product.
3. ………………..It is the relationship between the guest and the host, or the act or practice
of being hospitable.
4. ………………It is the management of the flow of goods between the point of origin and
the point of destination in order to meet the requirements of customers or corporations
 5. ……………………..It is a measure of how products and services supplied by a company
meet or surpass customer expectation.
6. ……………………….It is a key issue in logistics system planning and operations.
7. …………………….It is strictly related to information flows in the logistics system and
includes a number of operations.
8. ……………………IT is an often used along with road transportation in order to
provide door-to-door services.
9. ……………………..It is the group of activities associated with the supply of
finished product from the production line to the consumers.
10. …………………. It is the provision of service to customers before, during and after a
purchase.

Multiple Choices /True-False

1. Intermediaries include retailers …………………….and logistical organizations.
a. Internet companies
b. wholesalers
c. competitors
d. box stores

2. Some intermediaries use strategic planning, advanced information systems, sophisticated

marketing tools, measure performance on a return-on-investment basis, segment their markets,
improve their target marketing and positioning, and ……………..
a. contend with dwindling customer bases
b. aggressively “squeeze” manufacturer margins
c. aggressively pursue take over strategies
d. aggressively pursue market expansion and diversification strategies

3. Retailing involves getting the goods or services to the ultimate consumer. Which of the following
is not a form of retailing?
a. The Internet
b. Mail
 c. Vending machine
d. none of the above

4. Major retailer types include the following except …………………

a. specialty store
b. discount store
c. catalog showroom
d. the Internet

5. Retailers can position themselves as offering one of four service levels. Which of the following is
not one of these levels?
a. Direct service
b. Limited service
c. Self-selection
d. Self-service

6. Nonstory retailing falls into four major categories. Which of the following is not one of the four
nonstory retailing categories?
a. Buying service
b. Internet sales
c. Automatic vending
d. Direct marketing

7. One of the advantages of corporate retailing is that corporate retail organizations achieve
economies of scale, greater purchasing power, better-trained employees, and ………………..
a. wider brand recognition
b. more locations
c. branded merchandise
d. “fresh” merchandise
8. An independent retailer using a central buying organization and joint promotion efforts is known
as a ………………..
a. corporate chain store
b. voluntary chain
c. retailer cooperative
d. merchandising conglomerate

10. Franchising accounts for more than $1 trillion of annual U.S. sales and nearly one-third of all
retail transactions. Franchises are distinguished by three characteristics that are: (1) the franchisee
pays for the right to be part of the system: (2) the franchiser provides its franchisees with a system
for doing business; and (3) …………………….
a. The franchiser controls all actions of the franchisee including hiring and marketing decisions
b. The franchisee has unlimited freedom to change the operation once he/she pays the upfront
charges
c. The franchiser owns a trade or service mark and licenses it to franchisees in return for
royalty payments.
d. The franchiser receives a %age of sales from the franchisee for the right to belong

11. Retailers must make marketing decisions in the areas of product assortment and procurement,
services and store atmosphere, price, communications, locations and …………….
a. niche
b. style
c. shoppers
d. target market

12. The retailer must decide on product-assortment breadth and ………………

a. store location
b. layout
c. prices
d. depth
13. In the pursuit of higher sales volume, retailers are studying their store environments for ways to
improve the shopper’s experience. According to Paco Underhill, one of his suggestions for fine-
tuning retail space is ……………….
a. make the store “fun” and “interesting” but move the shoppers through it quickly
b. honor the “transition zone” and allow the shopper time to “sort out” the stimuli
c. place the checkouts in the rear of the store
d. make the store more receptive to “men” shoppers

14. After deciding on the product-assortment strategy, the retailer must establish merchandise
source…………………and practices.
a. vendors
b. suppliers
c. lead-times
d. policies

15. Retailers are rapidly improving their skills in demand forecasting, merchandise selection, stock
control, space allocation, and ……………….
a. advertising
b. display
c. choosing the media mix
d. selecting the marketing channels

16. When retailers do study the economics of buying and selling individual products, they typically
find that a third of their square footage is being tied up by products that do not make a ……………
a. sale
b. profit
c. funds
d. “turns”
17. ……………….measures a product’s handling costs from the time the product reaches the
warehouse until a customer buys it in the retail store.
a. Brand management
b. Shelf management
c. Profitability
d. Direct Product Profitability

18. The three elements of the services mix for retailers includes ……………..
a. ancillary services
b. breadth and depth
c. target marketing
d. transition zone

19. Pressed by discounters and by shoppers who are increasingly blasé about brands, retailers are
rediscovering the usefulness of ………………..as a point of differentiation for their stores.
a. clean well-stocked stores
b. “entertainment”
c. advertisements
d. customer service

20. Every store has a “look,” a physical layout, its “colors,” sounds, and even its “scent.” These
elements constitute a store’s ……………..
a. layout
b. transition zone
c. atmosphere
d. brands

21. Approximately …………………..of everything sold in this country is bought or influenced by a

woman.
a. 40 %
b. 85 %
 c. 80 %
d. 60 %

22. Most retailers will put low prices on some items to serve as traffic builders or ………………
a. loss leaders
b. profit leaders
c. traffic leaders
d. ad items

23. A EDLP pricing strategy for a retailer could lead to lower advertising costs, greater pricing
stability, ……………………and higher retail profits.
a. a weak image regarding low pricing
b. a weak image of price fairness and reliability
c. a stronger image of fairness and reliability
d. a stronger image of low prices

24. Traditional brick-and-mortar retailers are responding to the growth of e-commerce by providing
and emphasizing a ………………..as a strong differentiator to stay at home shopping.
a. celebrities on premises
b. shopping experience
c. expert advice in selecting
d. wider selection of merchandise

25. Fine specialty retailers most likely fall into the ………………group with respect to margins and
volume.
a. mixed markup, high-volume
b. low-volume, mixed markup
c. low-volume, low-markup
d. high-markup, lower-volume
 Answers
Matching Definitions
1. Communication
2. Direct distribution
3. Hospitality
4. Logistics
5. Customer satisfaction
6. Inventory management
7. Order processing
8. Air transportation
9. Physical distribution
10. Customer service

Multiple Choices /True-False

1. b
2. d
3. d
4. d
5. a
6. b
7. a
8. c
9. c
10. d
11. d
12. d
13. b
14. d
15. b
16. b
17. d
18. a
19. d
20. b
21. b
22. a
23. c
24. b
25. d

Homework Exercise
1. What do understand by direct distribution systems and indirect distribution systems?
2. Briefly explain logistics planning.
3. What do you mean by efficient supply chain management (SCM)?
4. What are the customer service goals?
5. Discuss about integration of sales and distribution strategy.